Is My Company's New PF Deduction Rule Compliant with the EPF Act? Seeking Clarity on Employee Impact

Hi, I need some help on the points below. I am working for a private company in Bangalore. Currently, my company is deducting the PF amount based on Basic salary * 12%. Now, they have changed the PF deduction rule to be based on the following calculation: If the basic/gross minus HRA is more than 15,000, then the contribution from both the employee and employer would be 15,000 * 12%.

Example Calculation

Basic = 33,000
HRA = 15,800
Basic - HRA = 17,200
PF Contribution (Employee and Employer) = 17,200 * 12% = 2,064 + 2,064 = 4,128

I am just curious to know, is this rule in accordance with the EPF Act? Will there be any impact on employees?

That is a wrong practice that is being followed in your company. PF contribution would be based on the basic salary, either it is limited to Rs 15,000/- or Basic, i.e., Rs 33,000, as in your case. There are no means for calculating PF contribution on the difference between basic salary and HRA amount.

I think you already posted this message before and got replies from the members.

But in any case, in this particular scenario, there is nothing wrong as the employer is paying PF on a salary of about 15000. There is no need for them to pay PF on any amount above 15000.

In other cases, the basic HR calculation is incorrect if the total is below 15000. The employer will be liable to pay the difference, penalty, and interest. There is no liability on the employee for the employer's mistake.